Jon Walker argues that worrying about how to keep Social Security ‘solvent’ for 75 years is silly. After all, predicting the future 75 years out is difficult. Something like this might happen:

Epidemics caused by drug-resistant bacteria in 2020 could kill a disproportionally large number of seniors.

Or:

By around 2060, the exponential growth in computing power could result in humanity reaching the technological singularity giving us almost god-like powers to control ourselves and our environments to an extent that is unimaginable.

Walker is being facetious, but I also think there’s a more basic point about the Social Security estimates that predict its DOOOMM!!!–they posit an ahistorically poor economic performance. For several decades. The U.S. economy has never performed that poorly. Ever.
And even in that case, we can raise payroll taxes then (and compared to the previous hikes of 100%, they would be smaller), or, if we do want to worry about a thirty year (27 to be precise, although it fluctuates from year to year) economic meltdown today, we can simply remove the cap on the payroll tax (currently, a family only pays payroll taxes on the first ~$106,000, making this a regressive tax that brings in an amount equal to about 85% of income tax revenue).

The Social Security crisis–which doesn’t exist–would be so easy to fix. But instead of worrying about the real and current employment deficit, our political betters want to screw over the elderly.

And since this is a depressing post, I’ll leave you with some appropriately themed Desmond Dekker:

Comments

You never see the graphs of such projections with error bands. Probably because nobody knows what they are, or if they do, they would show the projections to be absurdly precise. As regards Social Security, some people are spreading fear because of what are less than rounding errors.

These graphs always start with some history, and then make projections without differentiating past from future. The only way to tell is to find the present year. It would be interesting if they not only showed past history, but also showed past projections. That way we could see how good or poor the projections have been.

Carl: “So again, just f-ing tax me.”
Me too. It’s not like we’re going to avoid paying for everything anyway. The GOP legislators claim that money is being “saved” when they’re simply pushing taxes or bills farther down the line.

Carl: “And tax the people who make more than me even more.”
Yeah, well, that’s the important part. I’m not volunteering to pay more unless the Koch brothers are paying their share, also.

It isn’t just long-term projections that are the issue. The 2% payroll tax holiday for this year (part of the deal to extend the Bush tax cuts) means that Social Security is cashing in close to $100 billion from the trust fund more than it otherwise would have. Hence, that means more borrowing from other creditors, since there wasn’t the general revenue available to actually pay the trust fund.

See this Factcheck article about Social Security from March. Social Security is already paying out more benefits than it takes in in payroll taxes and even the near term projections don’t show that changing.

What it really comes down to is what people think Social Security is and should be. Is it a pay-as-you-go program where current taxes pay current benefits? Or is it something where people pay into it over their working lives and get a return on what they paid in?

I think that it is pretty clear that the former is a better description of what Social Security is, though many people feel that it is the latter. They think that they are entitled to their benefits based on what they had paid in payroll taxes over their lives.

What I see as a problem with Social Security is if it ends up that the number of current workers needed to pay for each retiree goes up faster than worker productivity goes up. I think that’s the issue of balance that tells us whether Social Security is ‘healthy’ as a program or not. And I think that’s also a problem with Medicare. It is a difficult question to ask, but how hard should people be expected to work to care for the elderly? We want to have compassion and pay back the previous generation that gave us our lives, but we also want to be able to pass down better lives to the next generation and live well for ourselves. It would be nice if we can continue to improve the lives of every generation, but it is not clear that we will be able to do that in America indefinitely.

These graphs always start with some history, and then make projections without differentiating past from future. The only way to tell is to find the present year. It would be interesting if they not only showed past history, but also showed past projections. That way we could see how good or poor the projections have been.

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